tv Bloomberg West Bloomberg September 27, 2016 6:00pm-7:01pm EDT
tom: this is a special edition primeoomberg surveillance time." we are live from our world headquarters in new york. with me is the traveling michael mckee. good to have you back in new york after the debate last night. as again, to do this kickoff to the summits at bloomberg. mike: we do have the most influential summit coming up and that's going to be an outstanding event. makeke markets murder --
the markets work. we try to get a conversation going in and hour or hour and a half, beginning in hong kong and owing to a series of important interviews with we have seenwhat with deutsche bank and the commerzbank announcement, the so immediate teams and we come to new york. what did you observe last night in the debate? what caught your ride? mike: the thing that was obvious was hillary clinton managed to convince people that she's a nice enough person and certainly has a command of facts and donald trump does not change. tom: i will go with that. i don't want to get my pinion in ire, unlike michael, but thought it was fascinating and what i loved about it was when people woke up in their bed like they do every day and listen to or watch bloomberg surveillance,
and that's how you begin your enjoying thep postdebate coverage, what did you think, julian? up,an: imagine me waking knowing i was coming here tonight and i wake up and flick on the television to bloomberg and there's this gorgeous face, and it's smiling and it says he's going to be there tonight robertson onulian donald trump. quicklyled tom pretty don't really believe i want to talk about donald trump much except to say, as long as he has brought it up, that i know donald and i like respect the rank
he's put back in central park. a lot of mayors left that to rot and he got it running and it is a great part of our park now. but i'm out of that race. for the formerte governor of new mexico and massachusettsr of and i'm pleased to do that. you supported in the primaries john kasich. ?hat do you want to see what are the attributes you think we need in this country? mitt romney exemplified what i want.
i want a really bright man, somebody that's a heck of a lot brighter than me or anyone i know. he was clearly that and a decent, good man. he was my perfect candidate. one more question before we get on to economics and finance and i want to tell our audience about julia. we will go to negative rates here. what do you need from your republican party today the election is over? how do you get for years out? that going to be an interesting change if there republican party is going to be strong in the years ahead. let's get started. robertson, of course with
tiger management, so much on the head's funny hedge fund business. why don't you start on this center.ich is front and mike: let's ask about central banks distorting markets in general and weather that really anders you or is something is a big part of how you evaluate an investment these days. think the rates have to be absolutely negative to be too low. we do have too much to fear as far as negative rates in the state yet. havenk it is tragic we
taken rates down this far. know the federal reserve's all over the world are really trying to ensure prosperity, but in so doing, they are ensuring a huge bubble which will be pricked and we will be heard badly by it, i think. that negative rates completely stopped saving because you are not only rewarded for saving but -- not only not rewarded for saving but penalize for saving. i don't think that's good. it caused a huge bubble in the bond market because people have nowhere else to put their money in less they buy a beautiful piece of art like our ceiling or pictures or
something of that nature. tom: where would you put your money now if negative rates have distorted the market and central banks have distorted the markets, how would you be exposed today at the end of the year? julian: i think the only game in town are equities. that theater. in mike: you have had what has been described as an years in predicate investment style that is basically your own. how would you tell people to look at equities? -- what withodel the model you would tell people to look at look like? them thatwould tell in my opinion, there is going to created byly chaos
the negative at low interest rates. a conservative attitude has to be taken and whether that not, is hedge funds or up to the individual investor. way of i think ameliorating the effects of bubbles. tom: i look at this and look at the yellen press conference which mike and i were stunned with the other day. operative theory you can use in investment if you don't know where the risk-free ,ate is or where stability is what can be the operative theory
other than getting lucky and picking the right stocks? one of the things that is still a blessing, i think is a lot of the great companies of the world are undervalued. fear of mrs. clinton on the drug companies has created a real bargain in biotechnology stocks. a company like celgene is very reasonably priced. other great companies, the greatest companies out there, google in those type things, , they are available at a very reasonable tom: multiple.
can we rip up the script? we normally weighed 30 or 40 minutes before we rip up the script. tom: welcome to our audience here in new york with julian robertson. his microsoft financial engineering when they return cash to shareholders? say they don't tow what to do or how invest, why are returning so much cash to shareholders? microsoft has a and i thinkder that's why i'm such a believer in it now. it's probably number two in the cloud business. stock when you
have a powerful engine under you is an awful good thing to do. great your own stock is a thing for a company to do. tom: you had to deal with the egos of tiger cub and you mentioned the new leadership of microsoft. what the esther ballmer get ofng in the 8, 9, 10 years malays? lise -- of malaise. whenn: the problem began mike: bill gates retired. you close your fund to outside investors, your returns dropped off because people that you were reluctant to get into the tech boom which turned into a bubble.
what do you think of tech today and mark how have your views evolved? bubble, theseom a great tech companies are among the cheap -- among the cheapest stocks. the 60's andgle in 70's and early 80's would have sold between 50 and 80 times earnings. iow 20's andery think that's where the soup are thes and probably good values around. when we talk about tech, it's a broad category. services?e microsoft what has the most value? julian: i think biotechnology
has the most value. the advances in cancer weht now are fabulous and ownable to get the bodies mechanisms to fight that cancer. earthk there will be some shaking movements. the idea that maybe you've got a window into what is happening in cancer research, is a like the old days were large pharmaceuticals can co-opt research and bring it under their umbrella like bristol-myers has done? there is certainly some of that going on and it is still biotechnology.
mike: when you identify a firm like that you like, one of your associates said your style is to do a ton of research and find out everything you can and when he likes a company, the vets the farm. --that still your style mark still your style? julian: i've never thought of myself as a bet the farm investor, maybe my proteges thought i was. tom: tell us about diversification and if we can shift to the dynamics of the hedge fund industry's everyday. the failures we have seen time and time again. help me right now with hedge funds. hedge as youy remember or are they just hedge fund in name?
i think a better name would be investment partnership. i do think it is sort of inclusive and always has been for some reason. i think generally speaking, most people are back to hedging more i havey see the risks outlined with the low interest rates creating the bubble. when the bubble bursts, people are going to get hurt. tom: how do you deal not with failure but with the market going up in the short screening with every thursday or friday the market is going to come to an end, yet with central bank support, we see asset prices go
up. how does a hedge fund manager deal with that? the idea of trying to not lose money, how do you deal with that? julian: it's the most difficult time i've ever seen the business and because there are a lot of who are actually and they make a business of doing that, furthermore, i don't know how i think they, but shorts andsqueezing that any rate, i think it's tougher to be a hedge fund investor than ever before.
hedge funds ordinarily don't outperform the market to accept i'm the markets go down for saying outperform the market. right now, it's a very difficult time for them. just said was not quite true. last five or six years, it has been difficult for hedge funds to keep up. three and 30 and the rule is to and 20. a 7%erstand when there is cd etc., you can make your rate and everyone is happy, including the limited partners of a given partnership.
do you just presume to and 20 trips away? two and 20on't think is sacrosanct and there's a in thet drift occurring fee structure. if you make it over, you get a payday of 20%. can i take a detour -- bute not rip up the script, i would like to ask for a little bit of a history lesson. you started your career in the 1950's and you have through it all. us you take us back and tell what was like investing in the mad men era and how it has evolved and how you've seen it evolved for good or bad over the years julian:? it has always been a great, fund -- great fun is this for me.
when i first got into the business, there was absolutely in looking at investment bankers by the investment banks. they just waited for people to it was not at all difficult to get a job in the investment banks. -- i was in an rotc program and saw a lot of people looking for jobs in new york at the same time i was and the real hotshot i've been on the ship with an things, they went into advertising. lately, people have swarmed into
hedge funds and it's very that i got into an industry that wasn't popular. it's something for people to avoidor jobs now over popular areas and go to areas where people are desperately needed. particularly in science and technology. let's welcome our audience worldwide and we will come back to the theme of looking back and looking forward. ofs is a special edition bloomberg surveillance prime
time. we welcome all of you worldwide live from our world headquarters in new york in celebration of a ofrific two days conversation. i'm tom keene with michael mckee. thingst influential builds here starting with hong kong in a few hours. to hong kong go and london and that here. you will want to stay with us. tom: let's finish up with julian robertson on where we are. how would you pick a hedge fund manager now? there are a lot of people scrapping away trying to get seed money. to some in our audience, it sounds like a lot of money but that's not in your world. the industries you mentioned earlier, are they so difficult that you look for more closing of hedge funds and returning of assets? julian: i still think the good
people will do well and the good people are beginning to do well again. how does one look for one? i think you look for records. are famous for seating , the tiger cubs and grand cubs, that youou look for want to give money to these days and is a harder to find people these days? that has been the really interesting part of our business, at least it has been for me. i tried to find what were little a goodhat would define
hedge fund manager. one of them is competitiveness. athletessuccessful just won't be beaten because they won't be. is very,tive nature very important. we've tried to find other characteristics and i have improved this yet, but i believe , the best ones have a real desire to make this a better place when they leave than when they arrived.
just look at new york and george soros and my politics are different, but he's a great philanthropist. so is paul tudor jones. and john paulson carrying on your charity at central park as well. julian: john paulson, steve mandel and john griffin. so many people are really doing things for new york city. i want to switch gears and talk about what i observed on the screen today which was commerzbank and deutsche bank and others collapsing. help us here with european banking. we could talk for the entire hour about this one thing. 2016, do wemn of hearken to the ghosts of 2007 and late 2008 because of the
inability of european banks to clear their challenges? are we there again as we were in late 2008? thatn: i can't be sure of and i think our banks are not in as bad of shape as theirs are. was shocked about the great german bank the other day. it's hard to believe. morganuld be like saying garrity was in trouble. jpmorgan. i was shocked. but the shock continues as thingok forward and see a like deutsche bank and others.
what the that will for next year? i have indicated i'm not the most lush guy around. mike: angela merkel has made news in regard to deutsche bank saying she's not going to bail it out. julian: i thought that was an amazing statement that she made up i don't quite understand why she made it. mike: we get the same things from our politicians in washington, don't fail out the banks. say put them them in jail. do you think that's fair? did the financials failed the country -- did the financial system failed the country to the
point where they should be prosecuted? in 2008i think people get a pretty darn good job of taking a potential disaster and keeping it going. i think the criticism is wrong. mike: you hear from the democratic nominee and her surrogates is we developed a financial system that has gone way beyond the intermediation needs into a parallel, shadow banking system that does not benefit society, but only benefit a small sliver of evil. tom: let me translate what he just said. you are the bad guy. mike: you said something about
being diplomatic. i'm trying that. be more specific. why might a bad guy? tom: because senator warren says so. what do you say to senator warren of massachusetts? julian: she's nice lady. mike: does the financial system work to the benefit of society is the underlying philosophical question. julian: i think it does. i really do. it is working under very, very difficult circumstances, but loans are being made and new isinesses are starting and think the banking system is i think itenged, but is still working.
tom: can you own your selected european banks? you mentioned biotech and some .f the giant tech stocks is there a part of european finance that is attractive to you? i would rather buy the american banks. things are not so great for them these low interest rates, that's where they make their money, on interest rates. tom: what would happen if janet yellen raises interest rates? if itould be the outcome factored up to some sort of irmal interest rate? julian:
think we would have a difficult time for a while. i think it's worth it to get that discipline. mike: you think the economy would be better off with higher rates? julian: probably not in the very short-term, but in the long term, i definitely think it would. does it increase the return on capital? where does the benefit come in at this point? julian: the benefit comes in in that we have a realistic system. , you take a guy who sells his is in north carolina. he gets $5 million for it. that's all the money in the world. there's no funny money hedge
funds. it's all sort of open and good and down to earth. that $5 million he is 30 or return on it $40,000 after taxes and he realizes he's sold his is this and is not able to live on his life savings. it's the financial repression a lot of people have spoken of for a number of years. this is a special edition of bloomberg surveillance top we are on with julian robertson of tiger management. thrilled to have you with us. we will go for another half hour or so. this is the kickoff to our most
influential summit in hong kong starting in a matter of hours. then on to london and new york with some exceptionally timely interview. i will point out francine lacqua plus interviews that you will see. we will be -- i can't member who is talking to him. mike: it's almost time for hockey season. talking about the fact that people can't make money at higher interest rates, is it going to slow the economy or bad additional capital investment to the economy? julian: higher interest rates are going to encourage savings. i think we desperately need
savings. take a guy who wants to set up a little foundation or something widow or something. they don't know what to do with the money. way they can do anything with it unless they going to stop. i think that is forced equity investing and it's just not a good thing. to be distinct here, the bubble or assumed level that you see in equities is very different from the nifty 50 europe decades ago. is that right? julian: yes. those stocks sort of love because they went so high.
but the ones that would have been 50-50 are very cheap. tom: who do you blame for this mess? the courage seen by a lot of officials, maybe they were wrong do you blame something for the conundrum we are in now? think janet yellen is unwilling to see the american public take any pain at all. because of that, i think she is creating a serious bubble where serious pain is. tom: how did we get the inability to maintain markets
because we did not want to bear pain? to a lot of people listening and watching this, we did not clear the markets, particularly in europe. where did this idea come from of pain-free capitalism? i don't know. i think it's come in part -- i will say this and i don't mean this derogatorily, intohe public is much more investing than ever before and think of the number of programs on television. we go, this is the bash surveillance part. the media onslaught that keeps everyone wired into the moment? is this the joe kennedy
shoeshine boy or the broader version of that? there are various investors credited with it but they knew to get out of the market when the shoeshine oil is asking for stock to. maybe it is. mike: how should people invest? what is fair for them to pay in which they look for in a return? if you are going to a hedge fund, you've got to make an awful lot to get a return on that kind of the. julian: that's right. not type of is this has tough for a it's a business. mike: what do you say to a guy started thegle who
no fee index fund and mark he says he should never go to an active manager because active manager can win for a few years but can't keep it up? julian: i think warren buffett would say the same day summit i would say we are at a time now where it would be good in anybody's portfolio to have a certain number of hedge funds. a number would either because part of theireast money is hedged the other way against the bubble.
there are services that track the performances of tiger cubs and our people -- would people be wrong to try to or can yout you do be successful doing get or should you be looking at your own invest in making your own decisions? i think if you take a long time frame, it has been stick with a lot of the very good hedge funds iat are out there now and .ertainly have most of my money it's not that i don't manage myself with the tiger cubs you
are talking about. that's an elite group and select few. i'm glad you brought this up. bomb is thetime tossure on big to show money provide an actuarial return people's retirements. calpers isgesting one example? maintain alternative funds in hedge funds or are they that they can use the tiger cubs? what does the big money do after 3, 4, six years of ugly investment returns? do they go back to vanilla investing? there are still
plenty of hedge funds around that would love to have their money and other good investors around to. they had huge amounts of money and can by berkshire hathaway. which is in itself an almost alternative invest. what is your actuarial assumption? it seems to be almost a fiction. do you have and your head and actuarial assumption for big, serious money? i do think you should -- the return to go
less you are in some sort of hedge fund. mike: stocks get overvalued and they go down. when you say there is a bubble, what are you referring to? you referring to the entire equity asset class or a specific sector of stocks? when you say the fed and janet yellen are setting us up for a bubble that will burst, where do you see the bubble? julian: i see it bursting in the stock market. i see it carrying over into real estate. tom: janet yellen mentioned that in her press conference with mike: is it a particular equity class or sect or? would say wehe fed don't see the bubble. where would you tell them to look?
julian: i would tell them to , to ownfinancial stocks bonds that yield nothing. i want to announces wonderful evening, particularly for those of you on bloomberg radio. this is a special edition of bloomberg surveillance. we are with you for a number of minutes with julian robertson. i can't say enough -- did you like the book "more money than god?" speaking -- are you on speaking terms with him?
i thought he treated alan greenspan better than you. julian: i thought he treated me well. tom: i want to talk about commodities. sort of with the southern hemisphere. we got ok meeting right now to try to figure out the mood -- figure out the move from 100. i look at commodities and how they old into your immense system. can you call bottom on commodities and say there's an inrageous opportunity industrial metals? julian: i certainly cannot say there is in hydrocarbons. i think the whole world is trying to find substitutes and rightfully so.
because they produce carbon and carbon produces global warming. a huge factor against hydrocarbons. think very soon, you are going to see china come out with a very strong program against hydrocarbons. i want to take you back down to washington and ask you about the way your industry is regulated. one of the big topics has been carried interest. when you make your two and 20 in the way you get taxed. should that be repealed as many in washington would like to do? should management income be taxed as ordinary income? julian: certainly, that is
ridiculous to have got. mike: why? julian: it's not justified. people think this is done to the hedge funds. that's not a big enough industry to do that. it's for the real estate country all over the and i think it's very unfair. one thing in one corner of washington is regulation of hedge funds. would that inhibit the hedge fund industry? thanks hey dodd-frank. with the hedge fund industry hate being brought under that -- brought under that? julian: i think there's a lot of regulation there already full i
think that's normal within industry when it grows. people in the banking side argue that it does care the industry. julian: i don't think it is that serious on hedge funds. i think it's a good thing to do. tom: in the time we have left, and this has to do with being in new york city, leon cooperman has had a bad month. i did full disclosure, i did a charitable event with him for the manhattan institute, but he seems to be the one under the bright lights of invest in. trading and the rest of it. this worry about the squishy thing insider trading did you worry about this and the
a lot of effort. one who hasn is complied with the rules over the i don't know him i'mibly well, but sympathetic with someone who finds himself in that situation. tom: you were directly involved with this september 11 of 2001. london has its own challenges and you had great affinities in london when you see brexit and the gloom of the united kingdom, what do you think of london's durability? london is going
to be durable, but this is going to be tough on the u.k. i think it's going to be very i think this was a andkly thought out brexit it's going to be a rough time for the u.k. for a while. what about for the eu as a whole? the brexit argument is the european experiment is not going to work out. are you optimistic or have you turn pessimistic as they struggle? julian: i am reasonably pessimistic on europe. but i think the immediate problem is probably rougher in the u.k. george soros has written a great i have a lotis and
of respect for him. i think it will be tough for the u.k. town you come from a small and went to an episcopal high school. you grew up through the great russian. this local campaign come we have heard a lot about how terrible america is and how we need to go back to the good old days. as you look at it, were the good old days that good? are we missing something we had then? or are you optimistic about where we are and where we can go? optimistic extremely because i think we have really great young people. i have always worked with young people.
and i think the young people of today for the old goats like me and are the hope of the future. tom: what is the distinction there where the millennials art trashed, about education and the kids coming forward -- it's almost like, as john edwards said, to america's. how do you pull into your optimism a large part of america represented by the politics of senator sanders or mr. trump? how do you pull the men to your optimistic vision of america? julian: i think for instance, they should go into some of the charter schools in new york. marvelousoing some things with these children.
the children who have had almost no background in terms of family helping them in any way, but they are doing great job with i think that's the great hope here. to: what do you want accomplish in the next number of years in new york city? we talked about london and the saw maden politics we less light. in your new york city, what would you like to see accomplished? julian: i would like to see every child who wants to go to a charter school be able to get into one. tom: how do we do that? julian: we have to quit fighting charter schools and encourage charter schools. i think that is something all of
us in this room should try to do -- should try to do. im: i have one question -- put my phone out here because this is foreign to me and entire audience worldwide need to ask how duke beat notre dame football. how did this happen? a second-rate school in north carolina actually beat mighty notre dame. julian: this is my biggest rival from the diversity of north carolina but they are a first-rate and they are a great organization i saw part of that game and i thought it was really thrilling. school, bute rival
duke is a fabulous school. can you run for president so we can have a sane and civil debate? julian robertson, thank you a wonderful bloomberg surveillance prime time. don't get up yet. we have a busy day tomorrow. day. very busy it starts in hong kong. the sun will be coming up there and we will be talking to the most important market figures in asia. then, we hop over to london and francine lacqua will have some of the biggest names in the european financial markets. tom: because of the news flow tomorrow, the chief executive officer of credit lease has got to be -- mike: how do they deal with the european banking system? tom: does it have a bit to do with like 2008 and what we saw today? history does not repeat
itself, it rhymes. it doesn't look like we have the kind of exit -- we have some banks with ad loads. thanke would like to everyone here for joining us. we're going to try to get four hours sleep. bloomberg surveillance and the early hours. ourt forget tomorrow, bloomberg most influential summit. and we say good evening. ♪ quarks the following program -- >> the following program has been brought to you by --
announcer: from our studios in new york city, this is open out charlie rose." charlie: tonight, hillary clinton and donald trump faced off in the first debate of 2016 trader an estimated 100 million viewers were expected to watch the 90 minute viewers -- broadcast, moderated by lester holt of nbc news. polls a the contest is essentially tied. here is a look at some key moments. mr. trump: i am going to cut taxes and you are going to raise taxes big league, and of story. ms. clinton: ie